Sunpharma vs Cipla Q2 FY25

Sun Pharma delivered a strong Q2 FY25 with consolidated sales of INR 13,264 crore, up 10.5% YoY, driven by US specialty growth (+20.3% to $517M) and India formulation growth (+11%). EBITDA margin expanded 350 bps YoY to 29.6%, aided by favorable product mix and lower material costs. PAT grew 28% YoY to INR 3,040 crore. The US specialty portfolio (Ilumya, Winlevi, Cequa) continues to perform well, while the India business gained market share to 8.1%. R&D spend guidance was revised down to 7-8% of sales due to clinical trial delays. Key risks include the binary outcome of Leqselvi patent litigation and potential margin pressure from higher selling expenses.

Guidance read

R&D spend to be 7-8% of sales for FY25: R&D spend for FY25 is expected to be in the range of 7-8% of sales, down from earlier guidance of 8-10%, due to delays in clinical studies. Leqselvi launch readiness within weeks of favorable judgment: Management stated they would be ready to launch Leqselvi within a couple of weeks post a favorable court ruling on the patent litigation. Ilumya PsA Phase III data expected H2 CY2025: Phase III data for Ilumya in psoriatic arthritis is expected in the second half of calendar year 2025, with launch shortly after approval.

Risk read

Key risks include Leqselvi patent litigation binary outcome — The Leqselvi launch depends on a favorable court ruling on the '335 patent; an unfavorable outcome could delay launch until patent expiry in Dec 2026.; R&D spend may remain below guidance if trials delay further — Management acknowledged that further delays in clinical trials could keep R&D spend below the revised 7-8% guidance.; Higher selling expenses pressuring margins — Other expenses rose significantly due to higher selling and distribution costs in US and EM, which could pressure margins if not offset by revenue growth.; Japan price cuts impacting ROW revenues — Price cuts in Japan are expected to continue pressuring ROW revenues for the next few quarters, as mentioned by management..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.

Cipla reported Q2 FY25 revenue of INR 7,051 crore (+9% YoY) and an EBITDA margin of 26.7% (highest ever, +70bps YoY), driven by strong profitability in India chronic therapies and Africa growth. PAT stood at INR 1,303 crore (18.5% of sales). One India grew 5% YoY, impacted by weak acute season, but chronic therapies outpaced market. North America revenue was $237 million, with lanreotide franchise at 35% market share but facing supply issues expected to resolve by Q4. Africa grew 22% with South Africa private market ranking #2. Management maintained EBITDA margin guidance of 24.5%-25.5% for FY25. Key risks include lanreotide supply disruption, Goa FDA classification uncertainty, and potential pricing erosion in US generics.

Guidance read

EBITDA margin guidance maintained at 24.5%-25.5% for FY25: Management reiterated full-year EBITDA margin guidance despite Q2 margin of 26.7%, expecting normalized Q3 and Q4. Generic Advair launch expected in H1 FY2026: Risking of generic Advair progressing as per expectations; launch targeted for first half of fiscal 2026. Lanreotide supply issues to resolve by end of Q3, recovery in Q4: Supply challenges expected to be resolved by end of Q3, with sharp recovery in lanreotide franchise from Q4 FY25. One India to outpace market growth on full-year basis: Management expects India business to revert to growth trajectory with respiratory uptick in Q3 and outpace market growth for the full year.

Risk read

Key risks include Lanreotide supply disruption — Supply issues at partner site will reduce Q3 lanreotide sales significantly; recovery depends on partner's production ramp-up.; Goa facility FDA classification uncertainty — Goa facility received Form 483 observations; classification still awaited, which could impact Abraxane launch timeline and other approvals.; US generic pricing erosion — Blended US price erosion of ~10% YoY, with potential for further pressure from new competition in Albuterol and other products.; India acute season weakness — Slow seasonal growth in acute category, especially anti-infectives, impacted India business; recovery dependent on respiratory season..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.